Rural Mainstreet Economy Slumps to 2023 Low

The region’s overall reading for October fell to 44.4 from September’s 49.5. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. 

“This is the weakest recorded reading for 2023 and points to weaker farm and non-farm economies. Despite this weakness, only 26.8% of banks reported tightening credit standards for farmers while 34.5% indicated that their bank had tightened credits standards for businesses in their area,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Farm equipment sales: The farm equipment-sales index for October increased slightly to a weak 48.0 from September’s 44.0. “This is the fourth time the past five months that the index has fallen below growth neutral. Higher borrowing costs are having a negative impact on the purchases of farm equipment,” said Goss.

Farming and ranching land prices: The region’s farmland price index dropped to 55.6 from September’s 65.4. “Creighton’s survey continues to point to solid, but slowing, growth in farmland prices as farm commodity prices weaken,” said Goss.

Banking: The October loan volume index climbed to strong 77.7 from September’s 70.3. The checking deposit index slumped to very weak 26.9 as an increasing number of depositors sought higher rates of return outside of banking. On the other hand, the index for certificates of deposits and other savings instruments increased to 59.6 from 59.3 in September.

“Higher short-term interest rates produced by Federal Reserve rate hikes over the past year continue to pose a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have not risen as significantly over the same time period,” said Goss.

Bankers were asked the greatest challenge to farming profitability over the next 12 months. Approximately:

44.4% named low or falling crop prices.

22.2% identified rising or high interest rates.

14.8% registered rising or high farm input costs.

7.4% reported trade barriers and trade restrictions.

Hiring: The new hiring index for October was unchanged from September’s 49.2. Despite these weaker readings, rural areas in the region continue to experience a healthier job market than urban areas in the same 10 states. 

Confidence: Higher interest rates, deposit outflows and a rising regulatory environment continued to constrain the business confidence index to a much weaker 24.1 from 26.8 in September. “This month’s reading is the most negative outlook recorded since May 2020. Over the past 12 months, the regional confidence index has fallen to levels indicating a very negative outlook,” said Goss.

Source: Creighton.edu